Judge, Jury, and Arbitrator: The NBA Constitution

nba-releases-its-formerly-secret-constitutionThe NBA has finally made its constitution available online. Notwithstanding the grand title, the document styles itself as a mere contract: “This Constitution and By-Laws constitutes a contract among the Members of the Association . . . The Association and each of its Members shall be subject to the oversight and control of the Board of Governors of the Association as set forth herein and shall be governed by the Constitution and By-Laws, rules, regulations, resolutions, and agreements of the Association, as they may be modified or amended from time to time.”

The justification for Commissioner Silver’s actions turns on this document. Article 24 vests in the Commissioner the power to suspend members, though Don Sterling is permitted an evidentiary contest (which didn’t make the news today):

“Following an opportunity for the affected party to submit evidence and be heard, all actions duly taken by the Commissioner pursuant to this Article 24 or pursuant to any other 39 Article or Section of the Constitution and By-Laws, which are not specifically referable to the Board of Governors, shall be final, binding and conclusive, as an award in arbitration, and enforceable in a court of competent jurisdiction in accordance with the laws of the State of New York. In connection with all actions, hearings, or investigations taken or conducted by the Commissioner pursuant to this Article 24, (i) strict rules of evidence shall not apply, and all relevant and material evidence submitted may be received and considered, and (ii) the Commissioner shall have the right to require testimony and the production of documents and other evidence from any Member, Owner, or Referee, any employee of any Member or Owner, and/or any employee of the Association, and any person or Entity not complying with the requirements of the Commissioner shall be subject to such penalty as the Commissioner may assess.”

Article 13(a) then permits the Commissioner to force a sale:

“The Membership of a Member or the interest of any Owner may be terminated by a vote of three fourths (3/4) of the Board of Governors if the Member or Owner shall do or suffer any of the following: (a) Willfully violate any of the provisions of the Constitution and By-Laws, resolutions, or agreements of the Association. [If 13(a) is triggered, the league will conduct an evidentiary hearing, at which] the Member or Owner so charged  shall have the right to be represented by counsel. Strict rules of evidence shall not apply, and all relevant and material evidence submitted prior to and at the hearing may be received and considered . . . The affirmative vote of three-fourths (3/4) of all the Governors shall be required to sustain the charges.”

Importantly, “The decisions of the Association made in accordance with the foregoing procedure shall be final, binding, and conclusive, and each Member and Owner waives any and all recourse to any court of law to review any such decision.”

Professor Michael McCann has argued that this last “waiver of recourse” clause is probably enforceable in a breach of contract case.  I don’t think that’s right — or at least, I don’t think it’s a home-run of a claim. But what’s even more mysterious to me – and maybe readers can help – is the idea that the contract clause stating that the Commissioner’s decision on the suspension will be treated  “as an award in arbitration” is sufficient to trigger the FAA’s arbitration privilege.

I would have thought that to take advantage of the FAA, there needs to be clear cut language which sends a dispute to arbitration, before an arbitrator who is distinct from the “prosecuting” party. After all, if the NBA can create a self-preserving and self-executing arbitration process, which can’t your credit card company!  But perhaps there’s something special about the NBA’s constitution which suspends the normal rules?

(All of this, obviously, is merely about the procedural merits.  Substantively, the Commissioner’s remarks were correct, nicely delivered and proportionate.)

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4 Responses

  1. Mike McCann says:

    Hi Dave,

    Your pieces raises some excellent points about the FAA and it’s interaction with the NBA’s internal system of law. I also appreciate you linking to my SI story, but just to be clear about that story, I was referring to a waiver of recourse clause in the franchise agreement between an owner and the NBA, not the language in the league constitution or bylaws. My understanding is each franchise agreement contains such a clause and it bars suing the NBA and other owners. This would be language independent from the documents the NBA made available today (which document trumps, I’m not sure, and you may reach the same conclusion even with the presence of the franchise agreement, but just wanted to note this).

    Enjoyed reading your piece and hope all is well.

    Best,
    Mike

  2. Dave Hoffman says:

    Thanks Mike. And I also recently saw your piece in SI which further fleshes out the legal complexities.
    http://sportsillustrated.cnn.com/nba/news/20140429/donald-sterling-nba-adam-silver-clippers-lawsuit-lifetime-ban/

  3. Mike Stern says:

    I am no expert on sports law, but a few minutes perusing the NBA’s “Constitution” (not an unusual term, some law firms I know use it too) suggests that Silver’s actions rest on a pretty slim legal foundation. Essentially, you would have to read the detailed provisions relating to covered persons, proscribed offenses, procedures and remedies as meaning that the Commissioner can do whatever he wants to anyone within his regulatory ambit (players, coaches, referees, owners, etc.), at least so long as he has the owners and the court of public opinion on his side. I think it will be pretty difficult to sell that interpretation to a court or arbitrator, particularly if they are making their decision long after the public outrage has subsided.

  4. Mike Stern says:

    I read Mike McCann’s piece and agree that it is very helpful, but I would take issue with his statement that “Sterling seems to lack a viable argument that his conduct was not seriously detrimental to the NBA.” It seems to me that Sterling has a pretty good argument that he did not engage in any “conduct” as that term is used in the NBA charter. This is buttressed by looking at Article 35, which seems to distinguish between “conduct” and “statements”. A player can be punished for either (although the fine for statements is much less than what was imposed on Sterling), but Article 35A only provides for disciplining persons other than players for “conduct.” I imagine that Sterling’s lawyers will vigorously contest the claim that his private conversations could be considered conduct detrimental to the NBA.